Why we use VERIBANC®
Since 1981 VERIBANC® guarantees there is No Conflict Of Interest in their safety ratings.
They have never accepted fees or payments to rate any institution.
VERIBANC is the nation's first bank rating service for consumers.
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We GUARANTEE our rates 100%. If an institution has lowered their
rate or withdrawn from the market, we will replace the rate with the highest available rate. |
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What is the FDIC?
The Federal Deposit Insurance Corporation is a United States government corporation created by the Glass-Steagall Act of 1933. It was created to restore the public's confidence in the U.S. banking system after the widespread bank failures of the Great Depression. The FDIC is funded by the insurance premiums banks pay for the coverage and serves as a sort of safety net that guarantee deposits held by commercial banks.
What is covered by the FDIC?
The FDIC insures deposits held at an insured bank. This insurance covers deposits in check and savings accounts, money market deposit accounts, and certificates of deposit (CDs). FDIC insurance cover the balance of a depositor's account dollar-for-dollar up to the insurance limit, including both principal and interest accrued up to the closing of the failed bank.
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Important example: If you owned a $100,000 CD at an FDIC insured bank that fails and at the time of failure you were owed $450 in interest, the FDIC would pay you only your original investment of $100,000 (the FDIC maximum amount insured). However, if the CD amount was $99,000, the FDIC would cover both the original investment of $99,000 but also the $450 of interest due to you. The FDIC would pay you $99,450. |
If you are not sure if your bank is covered by FDIC insurance, look for the following:
- FDIC sign in the window
- FDIC graphic on the banks home page on the internet
- Call the FDIC toll free at (877) 275-3342
What is not covered by the FDIC?
FDIC insurance does not cover money invested in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities. Note that this is true even if these investments were bought from an insured bank. The FDIC also does not insure U.S. Treasury bills, bonds, or notes - these are back by the "full faith and credit" of the U.S. government.
What are the FDIC insurance coverage limits?
IMPORTANT: Recent legislation raised the FDIC insurance coverage to $250,000 through 12/31/2013. Please go to http://www.fdic.gov/deposit/deposits/changes.html for a complete understanding of how this temporary change may affect you.
The FDIC's basic insurance covers deposits at U.S. insured banks that purchase the insurance. In the event that an FDIC-insured bank fails, deposits are protected up to $100,000 per depositor. Certain retirement accounts, such as IRAs and Keoghs, are protected up to $250,000 per account holder. Since FDIC insurance coverage is determined on a "per depositor" basis, joint accounts (if properly titled) could be covered up to $200,000.
Having deposits at different branches does not increase the FDIC insurance coverage. The deposits from all branches for one bank would be added together and viewed as one deposit.
If you have both business and personal accounts in the same bank, the accounts of the business may be viewed as a separate entity and qualify for separate FDIC insurance. However, if the business is being operated as a sole proprietorship, the business and personal accounts may be combined and the FDIC insurance limited.
Be Safe! Why take a chance of losing your money?
With time and expert advice, any investor can take the proper steps to guarantee their accounts are fully insured by the FDIC at one insured bank. However not seeking advice on the title that should be put on each account (personal, business or trust), understanding the amount of insurance available based on the type of account or developing a plan to not exceed the insured limits may result in the loss of principal and interest if a bank should fail.
While seeking the advice of an expert is always the best approach, here are some basic steps to consider for those seeking to do it on their own:
- Separate your personal and business checking and savings account into different insured banks
- Always be aware of the $100,000 insurance limits. If the personal or business checking and savings accounts approach $100,000, open accounts at another insured financial institution.
- Buy your CDs at banks which are different than where your personal and business accounts are held.
- If you CD portfolio exceeds $100,000 continue to diversify your CD holdings by buying CDs at other banks. Remember the FDIC provides you with insurance up to $100,000 per insured bank. If you hold ten $100,000 CDs at ten FDIC insured banks, you would have an aggregate insurance coverage amount of $1,000,000.
Note: Consideration should be given to the amount of CD to be purchased. Please revisit the $100,000 CD vs $99,000 CD noted above.
Seek Professional Advice
Each investor's situation is different and the FDIC regulations can be complex and confusing. Each investor should consult a tax or financial advisor before making important financial decisions. This section of our website is for educational purposes only and is not intended to be a substitute for seeking personalized, professional advice.
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